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By Richard Rittorno

Continuing our exploration for an African ETF, this time around we turn first to the Market Vectors Africa Index ETF (AFK).


(Click to enlarge)

AFK is an African ETF with roughly $80 million in assets, holding about 25% of its weight in developed market businesses that do business in South Africa and West Africa. Because a quarter of its assets aren’t headquartered in Africa, the fund avoids some of the instability of local African markets.

The fund also has roughly 25% of its weight in South Africa, while Nigeria and Egypt account for an additional 18%. Morocco rounds out the fund with a weighting of 12%. Financials across the board represents 41% while materials and energy come in at 31%.

The AFK fund has fared quite well despite the drop in crude oil and the hard sell-off of other commodities. The African ETF was up over 20% in March and still holds an impressive 9.9% increase from the beginning of the year, compared to the S&P 500′s 5.25% move for the year.

AFK is also paying shareholders a 3.49% dividend to hang around while Africa transforms into an emerging market. All in all, AFK is outpacing the S&P 500 (SPY).

A quick look at the basic vitals:

Gross Expense Ratio

0.95%

Net Expense Ratio

0.78%

Total Assets

$80M

SEC 30 Day Yield (as of 02/29/12 )

Distribution Yield (TTM)

3.28%

Ann. Dividend/Yield

$0.971/3.49%

Ex-Dividend Date

12/23/2011

Premium/Discount

-0.36%

52-Wk Range

25.24 – 33.57

Leveraged ETF Factor

100

Fund Inception

07/10/2008

The next African ETF I want to highlight is the SPDR Emerging Middle East & African ETF (GAF) which has been flying under the radar for more than five years now. As the name suggests it’s a multi-continent fund with $100 million in assets while boasting lower expense ratios, a lower P/E, and even a higher dividend than the better-known iShares MSCI Emerging Markets Index Fund (EEM).

What’s the catch? Well the name is somewhat deceiving. Those looking for an African ETF that could provide stability by being, as the name suggests, exposed to multiple continents, would be disappointed to learn 90% of the assets are weighted in South Africa. However, those looking to South Africa may be pleasantly surprised.

A quick look at the basic vitals:

Gross Expense Ratio

0.59%

Net Expense Ratio

0.59%

Total Assets

$100M

SEC 30 Day Yield (as of 04/30/12 )

Distribution Yield (TTM)

3.08%

Ann. Dividend/Yield

$2.20/3.40%

Ex-Dividend Date

12/16/2011

Premium/Discount

-0.24%

52-Wk Range

57.97 – 76.49

Leveraged ETF Factor

100

Fund Inception

03/19/2007

The last African ETF I want to highlight came to market in mid-January this year. The iShares MSCI Emerging Markets EMEA Index Fund (EEME) is a multi-country, multi-continent ETF with a 44.5% weighting in South Africa, its largest country weight, and another 2.6% for Egypt. The remainder is divided up mostly between Europe, the Middle East and other African countries.

Overall the ETF is really not built for these market conditions, dropping to a 52 week low during the May sell-off last week. One of the issues is that it’s thinly traded and hasn’t been on the market long. Definitely a name to be aware of, but it doesn’t appear to have found its footing yet.

A quick look at the basic vitals:

Gross Expense Ratio

0.68%

Net Expense Ratio

0.49%

Total Assets

$11M

SEC 30 Day Yield (as of 04/27/12 )

2.38%

Distribution Yield (TTM)

Ann. Dividend/Yield

No Regular Dividends

Ex-Dividend Date

Premium/Discount

0.13%

52-Wk Range

47.57 – 76.64

Leveraged ETF Factor

100

Fund Inception

01/18/2012

Bottom line: African ETFs have held up well for the most part in the face of issues that surround frontier markets, but not all ETFs are the built the same. You need to do your homework, truly understand what you’re buying into, and realize this not a fast trade but a long term investment. As to which African ETF to select, that depends on your risk tolerance and investing style. You should speak to a broker concerning these assets. I for one favor assets that pay me to wait for a turnaround.

Other ETFs to consider but not mentioned in these posts are:

  • The First Trust Emerging Markets AlphaDEX Fund (FEM)
  • The EGShares Low Volatility Emerging Markets Dividend ETF (HILO)
  • The South Africa and the EGShares Industrials GEMS ETF (IGEM)
  • The PowerShares MENA Frontier Countries ETF (PMNA)
  • The Guggenheim Frontier Markets ETF (FRN)
  • The WisdomTree Middle East Dividend ETF (GULF)
Source: Africa: The Final Frontier Market Redux